The Problem With LA's Pension Reform Measure

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A measure on this month's city of Los Angeles ballot has been touted as pension reform. But if history serves, it may produce little in the way of savings.

Amendment G, as it's called, proposes to save pension savings by requiring police officers and firefighters to contribute for the very first time to their retiree health care benefits and reduce pension payouts The problem? In a feature that recalls the punishments visited by LAPD rookie Ethan Hawke by the veteran LAPD cop played by Denzel Washington in the film "Training Day," the measure exempts current workers -- and applies only to newly hired cops and firefighters.

These kinds of two-tiered systems appear to produce savings on paper -- but they often don't in the long run because they are so unstable. Unstable politically, that is. Governments that have adopted these two-tiered systems in bad budget times often restore the system back to one tier in the good times. This is true of California, which went to a two-tier pension system in the early 90s but reverted to what is effectively a one-tier system during the dot-com boom at the end of that decade.

Real pension reform requires extracting savings and higher contributions from current workers -- and building stronger pension and retiree health systems that are the same for everybody regardless of when they were hired.